This article makes an interesting point that I had not thought of. Namely;
How are companies with this exclusion in their policy going to cope? Will they have any resource available to them? Will insurance companies play nice and pay out anyways?
I doubt the insurers will pay out. However much the PR could look good, I don’t think that they could afford it – and the general public could justifiably condemn their publicity-seeking at a time like this.
I thought this was a duplicate thread, but I can’ find the original.
That article vastly overstates the costs. Read Reinsurance Companies Wait to Sort Out Cost of Damages at the New York Times website.
Further,
The value of the WTC,
On personal losses,
It seems clear that most claims will be paid, even if reinsurers stick to their normal policy procedures and precedent.
I wouldn’t be so hasty. There are a lot of costs beyond the property value of the buildings such as:
[ul]
[li] Life insurance premiums from those killed[/li][li] Medical costs of those who survived but were injured[/li][li] Clean-up costs which are likely to be considerable[/li][li] Lawsuits out the ass (I shudder to think of the feeding frenzy attorneys will have on this one…airlines sued, airline manufacturers, airports, building owners, architects, construction firms and so on)[/li][li] Lost business insurance (also likely to be quite considerable)[/li][/ul]
That’s all I can think of for now but I bet there’s more in there somewhere. Add it all up and I think $40 billion starts to sound cheap.
This topic has been a subject of conversation in my office. Since I work as an adjuster for an insurance company its no big surprise. After a few hours of discussion yesterday afternoon we came to the conclusion the property damage would most likely be covered.
Frankly terrorism is not an expected exposure in American property insurance policies. It doesn’t happen here with enough frequency that those who draft the policies consider it a risk worth calculating. The closest exclusion in the most common property policies excludes damage from “War and Military Action”. War is not defined. If it’s not defined in the policy or by case law a term or word is construed in the policyholder’s favor if possible and the dictionary is the source of the definition. According to Webster’s War is “a state of open and declared armed hostile conflict between states or nations.” An insurer would be hard put to argue a terrorist act is an act of war. I’m sure someone will try. I can’t see the courts supporting that reading of the policy.
On a more cynical note I would expect underwriters and insurance executives are already drafting the Terrorism Exclusion to be added to next year’s policies.
CNN said that terrorism was not part of the insurance exclusions. they didn’t seem to specify much more.
I was just watching CNN, and they said most insurance companies will pay out their policies.
They noted that if Congress declares the bombing an Act of War, insurance companies would not have to pay. If they do, it will be interesting to see which companies pay anyway.
A standard exclusion in every policy of the insurance company for which I used to work is “Treatment, services and supplies for any injury or illness caused by (a) atominc or thermonuclear explosion or resulting radiation; or (b) any type of military action, friendly or hostile.” Previous policies included language excluding coverage for any illness or injury resulting from “an act of war, declared or undeclared.” So the exclusion is already there, since our company drafted model language. Companies who pay off will do so because of PR, rather than legal obligation.
A friend of mine had planned a trip to NYC for a while now, but after yesterday’s events has decided to change her mind (understandable).
Air Canada, however, will not let her trade in her ticket, nor will the cancellation insurance company accept her cancel request.
Why?
“Act of war”
And seeing as that’s exactly what’s been quoted over the last 36 hours on every cable network in the world, she seems to be SOL.
http://web.montereyca.com/content/monterey/2001/09/13/business/d2.insurance.0913.htm
‘Insurance companies are going to be particularly hard hit,
because they’re paying catastrophic claims on life insurance,
business insurance, workers’ compensation insurance and
property insurance,’’ said Jeof Hall, an economist at Boston’s
Thomson IFR investment advisory firm. ‘‘It’s going to be a while
before they get back to normal.’’
Michael Paisan, an analyst at Williams Capital, estimated that it's
possible insurance losses could top $5 billion. Reinsurers such as
Berkshire Hathaway Inc., Munich Reinsurance Co., and Lloyd's
of London - which offer excess layers of coverage - will probably
have the biggest exposure, he said."So Silverstein just bought the WTC 6 weeks ago. The insurance policy for the loan IS covered against terrorist attacks. It is NOT covered against “acts of war.” So if the U.S. declares war, Silverstein, GMAC, et al. may be out of a lot of dough.
Latest news I am seeing here states that only 1 of the 2 WTC towers is insured - the idea being that there was no way that both could be destroyed…
So they can ask Congress for money to put them back. Oh, wait, didn’t they just ask for $20B? Yep.
Federal Express and all other big delivery companies have clauses in their delivery contracts to protect them from delays beyond their control, like weather, acts of God, sabotage and such. While this might not be considered an act of war, it was beyond the control of Fed Ex, so their reimbursement comes into effect.
Besides, Federal, as well as other companies, use a basic policy for delivery reimbursement of something like 10 cents on the dollar up to something like $500. Nothing over $500 unless you pay more to take out full coverage, and that covers only up to a certain amount because there are too many ways to ship damaged goods and claim they were damaged in transit. Because of the inevitability of delays, they limit the claim amounts also, usually the basic one being just a repayment of the delivery cost.
In WW2, war was good for the economy because it sucked out around 1/3 of the population into the military during the end of the depression and opened up jobs for the rest. Plus, it put the economy on war footing, which means factories opened up with government loans or payment to produce war goods where none was needed before. Factories hired people at a livable wage, bought raw materials from previously nearly shut down sources and they had to hire people to meet the demand for the factories and then the attendant industries supplying food, transportation, clothing, housing and entertainment suddenly had a source of income again, so they picked up.
Instead of a grocer buying 20 dozen eggs a week, he needed 60, so the egg farmer obliged him and obtained more payment, and he spent more money on feed, which enriched the feed producer and so on and so forth in the trickle down theory.
It is said that WW2 pulled us out of the depression.
War is always good for munitions and arms manufacturers and those who make war machinery, like tanks and trucks, Hummers and mass transport cargo aircraft. I’m not even mentioning the war profiteering which is inevitable that still contributes to the economy.
Farmers, manufacturers, and forges usually go into major production because it takes a tremendous amount of goods to keep an army going. That requires money and forms of money, like ration stamps, which are backed by the government for restricted products.
I am waiting for a FedEx package and it says on their Web site that because of FAA restrictions, your package will “get there when it gets there.”
Well okay, here is what it REALLY says:
From what i gather from the rest of the statement on the site, even though it looks from what I quoted that FedEx is only having problems in Manhattan, I think they mean that money-back guarantee goes for all of the country.
FYI–I heard on the news this AM that Silverstein et al WILL be covered for the damage. It sounds like, in this case, everyone agreed that “acts of war” refers to acts perepetrated by a foreign government, not by individuals.